Shareholders in ONEOK, Inc. (NYSE:OKE) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline. Investor sentiment seems to be improving too, with the share price up 9.9% to US$64.35 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
After the upgrade, the ten analysts covering ONEOK are now predicting revenues of US$24b in 2022. If met, this would reflect a notable 11% improvement in sales compared to the last 12 months. Per-share earnings are expected to increase 7.9% to US$3.80. Previously, the analysts had been modelling revenues of US$21b and earnings per share (EPS) of US$3.80 in 2022. There’s clearly been a surge in bullishness around the company’s sales pipeline, even if there’s no real change in earnings per share forecasts.
It may not be a surprise to see that the analysts have reconfirmed their price target of US$68.39, implying that the uplift in sales is not expected to greatly contribute to ONEOK’s valuation in the near term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values ONEOK at US$80.00 per share, while the most bearish prices it at US$56.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the ONEOK’s past performance and to peers in the same industry. The analysts are definitely expecting ONEOK’s growth to accelerate, with the forecast 23% annualised growth to the end of 2022 ranking favourably alongside historical growth of 6.8% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 6.0% annually. So it’s clear with the acceleration in growth, ONEOK is expected to grow meaningfully faster than the wider industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Seeing the dramatic upgrade to this year’s forecasts, it might be time to take another look at ONEOK.
Analysts are definitely bullish on ONEOK, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including the risk of cutting its dividend. You can learn more, and discover the 1 other concern we’ve identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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